Oct 8 The EU drops its "dirty oil" labelling for Canadian heavy crude

In 2008, the European Union set a greenhouse gas (GHG) reduction target of 20% below 1990 levels by 2020, part of which included a 6% reduction specifically for vehicle emissions.

As part of this initiative, the European Commission had labeled crude oil derived from oil sands to be a “high intensity fossil fuel”, assigning oil sands crude oil a carbon-intensity value 20% higher than conventional oil. Therefore any attempts to import Canadian oil sands crude would have to be offset by purchasing “less carbon intensive” feedstocks, such as biofuels.

The plan met with much opposition from several member states and has remained in limbo for the past 3 years. A sagging European economy and strong desire to break free of Russian oil has resulted in a change of heart from the European Commission, who has now agreed to drop the 20% penalty for western Canadian crude oil. However, the commission cited the desire to finalize the EU-Canada trade deal as the main contributing factor in its decision. The European Commission noted it would still meet it's GHG reduction targets by using an alternative methodology for calculating carbon-intensity.

Numerous studies have shown oil sands crude oil to be 5 to 10% more carbon intensive than the average conventional feedstock. In fact, a 2014 report by The International Council on Clean Transportation (link) prepared specifically for the EU acknowledges that carbon emission from Canadian oil sands crude oil are on-par with or better than oil sourced from Nigeria, Venezuela and California. Oddly, the reports fails to address exorbitant natural gas flaring rates from Russian oil fields citing lack of published data. In 2013, the EU imported almost one third of its oil from Russia. Russia will likely remain the largest crude oil importer into Europe for some time to come, despite threats of sanctions over the invasion of Ukraine.

“Reports prepared specifically for the EU acknowledges that emissions from oil sands derived crude oil are on-par with oil sourced from Nigeria, Venezuela and California. Oddly, the EU places no negative labelling for these countries and also fails to acknowledge the exorbitant natural gas flaring rates from the EU's largest oil supplier, Russia. The EU also makes no mention of its policy on buying oil from regimes that fund terrorism and deny basic human rights to its citizens.”

Since the climate change debate began almost 10 years ago, EU countries including the UK have spent hundreds of billions in taxpayer funds to build solar and wind power plants, while at the same time cutting social spending and implementing strict austerity plans throughout Europe. This green-tax has added a serious headwind to the growth of the many European economies. The EU has seen flat to no growth in the past 6 years with many members remaining stuck in recession and long term deflationary cycles.

In 2011, the EU set greenhouse gas (GHG) reduction target of 20% below 1990 levels. However, GHG levels in 2011 were already 17.5% below 1990 levels. In fact, the EU has admitted 50% of its reduction in emissions is due to contracting economies within EU member states.

By all accounts, the EU as a whole has already met the 20% reduction target. However, when the emissions reduction plan was enacted in 2011, emissions were already 17.5% below 1990 levels and steadily declining. The EU has admitted that 50% of the declines in GHG emissions attributed to contracting economies throughout EU member countries. The European Commission is currently proposing a revised objective of 40% below 1990 levels by 2030. This new target has been met with opposition from eastern European members which still rely heavily on coal-fired power plants.

Canada exported 500,000 barrels per day of crude oil to Europe in June of this year. That number is expected to rise as North American crude oil production increases and will eventually outstrip domestic demand. Europe could prove an important trading partner as Canada's oil industry seeks to diversity away from the United States, which currently takes in 97% of all Canadian oil exports.